Published 4:00 am, Thursday, May 24, 2007

Photo: THU HOANG LY

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Steve Poizner, candidate for California State Insurance Commissioner, is flanked by his wife, Carol, as he talks to reporters after casting his absentee ballot at the Santa Clara County Registrar of Voters, in San Jose, Calif., Tuesday, Nov., 7, 2006. (AP Photo/Mercury News, Thu Hoang Ly)
Ran on: 11-08-2006
Steve Poizner, the Republican candidate for state insurance commissioner, with his wife, Carol, beside him, talks to reporters after casting his absentee ballot in San Jose.
Ran on: 11-08-2006 Ran on: 11-08-2006
Steve Poizner, the Republican candidate for state insurance commissioner, with his wife, Carol, beside him, talks to reporters after casting his absentee ballot in San Jose.
Ran on: 11-08-2006 MAGS OUT NO SALES less

Steve Poizner, candidate for California State Insurance Commissioner, is flanked by his wife, Carol, as he talks to reporters after casting his absentee ballot at the Santa Clara County Registrar of Voters, in ... more

California Insurance Commissioner Steve Poizner said Wednesday that Allstate Corp. could be required to issue refunds to its policyholders if the state determines its rates are excessive.

Poizner issued an order that requires Allstate, which said 13 days ago that it will stop selling new residential policies in the state beginning July 1, to demonstrate its rates are not excessive. In dropping new policies, Allstate said California is "catastrophe-prone." The insurer did say it will continue to serve existing policyholders.

The commissioner said he has reason to believe Allstate rates are excessive because other insurers have reduced their rates in the state while Allstate is seeking a 12 percent rate increase. He also said the company's loss ratio is relatively low.

Poizner said he believes the Department of Insurance could hold a hearing on Allstate's rates as early as July.

"I am drawing a line in the sand," Poizner said during a conference call with reporters. "If I find that Allstate's rates are excessive, refunds will occur."

Allstate's current California homeowners insurance rates were reviewed and approved by the Department of Insurance in 2003, "and our policies are competitively priced," Rich Halberg, a spokesman for Allstate in California, said in a statement.

He said Allstate is seeking the 12 percent rate increase "so that the company will be in a strong position to help meet the needs of policyholders in California over the long term."

"This rate increase would reflect the true costs of providing homeowners insurance in the state," said Halberg, "including the cost of potential assessments from the California Earthquake Authority and the costs of reinsurance contracts, which help to provided added protection by diversifying catastrophe risk."